Proptech: The Answer to Increased Productivity
The Answer to Increased Productivity and profit in the rental property sector
By Ben Shaw, CEO of residential property disruptor HouseME
Price trends are not encouraging, even without COVID-19 effect
Take the findings of the PayProp Annual Market Report 2019 as an example. Although at first glance it seems that the trend is simply continuing sideways and not declining further, we believe that a turnaround is at best nine months away and all property players need to disrupt their business-as-usual to adapt.
Just-completed developments apply supply-side pressure, resulting in an abundance of tenant choice – and therefore negotiating power – which pushes prices down. In the commercial space, reports show that average renewals are being concluded at 8% below previous rental rates, which shows how tough the market really is. And, comparing residential rental growth of 4.5% to inflation, there is no real growth in the market at the moment. Our view, therefore, is that the best way to claw back value in the market is to reduce the cost of vacancy as well as the cost of management fees.
Although a roof over one’s head will always remain a core necessity, the COVID-19 virus has resulted in a slowdown in new tenants applying for rentals, and we recommend focusing even more on retention. It is certainly in the tenant’s best interest to stay home for the time being, which helps.
The role of technology is increasingly recognised, now more relevant than ever
As in most industries, the real test in the rental property sector is the ability to embrace technological change. PayProp’s first-ever State of the Rental Industry Survey showed that 89% of the property professionals surveyed use property technology (proptech) at work on a daily basis, and 90% agreed that proptech could enhance their jobs and businesses.
With significant technological disruption in the property sector, the key question on property professionals’ minds is where they fit into the ecosystem three years from now. Far from being a competitor or a threat to these professionals, a platform such as HouseME offers efficiency to all users and offers agents the opportunity to work for and position themselves for the next growth curve, which is already being driven by proptech. HouseME’s 2.5% fee covers all but the manual and relational services that an agent provides, which means that a savvy agent can work on our platform, charge a slightly higher commission, and build his or her book far faster and more effectively than anywhere else. We have, in fact, experienced an increase in agency interest as a result.
The survey also found that 58% of respondents lowered their commission to keep a landlord, while 63% of respondents said that rental increases were lower than usual in 2019. While this is an excellent strategy for retention, it is unsustainable for agencies with high overheads. We believe this is partly what’s driving interest in our platform, as the capital investment required for agencies to build a complete rental management tool similar to what HouseME offers is prohibitive. HouseME’s platform allows tenants to access and apply for listings, book viewings on our viewings scheduler, digitally sign the lease, rent DepositFREE, and request maintenance jobs online. Landlords have been enjoying this convenience for years and it’s great to see agencies starting to catch up, especially now that social distancing principles dictate that we perform more and more daily tasks virtually.
Mitigating risks has gone from prudent to essential
One of the greatest challenges noted by participants in the PayProp survey is arrears, with 69% of participants agreeing that arrears are now a bigger problem than a year ago, and 51% reporting at least one tenant evicted in 2019. Again, HouseME’s technology is able to provide a solution to this age-old problem. Our rock-solid screening process and online payment system are backed up by our rental guarantee. This benefit – which results in a collection rate of 99% – is available to landlords and agencies nationwide.
As the economic impact of COVID continues to gain momentum, the value of a secure, digital platform which offers well-oiled processes and risk mitigation products, minimises fees and provides tenants and landlords unbiased advice has never been clearer, and could certainly help tide agents and landlords over. Savvy agents who understand proptech’s potential should strongly consider using platforms that allow them to perform at their best, at significantly lower cost, while working from home. HouseME has been designed and built for every landlord, property manager and tenant in the country.